SACRAMENTO -- Gov. Arnold Schwarzenegger ramped up his rhetoric to state employees Wednesday, warning them he would start issuing layoff notices if a court doesn't let him force workers to take two unpaid days off a month.

State employee unions have sued Schwarzenegger over the furlough plan he estimates will save the state $1.4 billion this fiscal year, arguing he cannot unilaterally impose the furloughs.

In an appearance Wednesday at the Sacramento Press Club, Schwarzenegger said he told union leaders they can either find a way to save the state an equivalent amount or face the consequences.

"The fact of the matter is, in the end I have the authority as the governor to, if they don't go along with the furlough, lay off the amount of people necessary so that we have a savings of $1.4 billion, so that's what I will do," Schwarzenegger said.

Despite weeks of meetings with legislative leaders from both parties, Schwarzenegger has yet to reach a deal on how to address a projected $42 billion deficit over the next 18 months. They hope to fill the gap before February, when the state could start to run out of cash and begin issuing IOUs instead of payments to some contractors.

A Sacramento County Superior Court judge was scheduled to take up the unions' lawsuit over the furlough plan today. The governor hopes to start the mandatory days off on Feb. 6.

The furlough threat comes as the Schwarzenegger administration and the state's largest employee union, SEIU 1000, are negotiating a new contract for 90,000 workers.

Negotiations have taken on a new urgency recently as the state slides toward insolvency, SEIU spokesman Jim Zamora said.

"On the one hand we'd like to compromise, make some sacrifices to help the state, but also to protect our members ... to protect people from getting laid off," Zamora said.

Schwarzenegger also has sought other concessions from state employees, including eliminating two of their 14 paid holidays.

On Wednesday, he called state workers dedicated individuals who make California run. He said he wants to avoid layoffs if possible.

"To me labor has the choice, and I made this very clear: That they can help us in making the decision in how they save the $1.4 billion," he said.

Bruce Blanning, executive director of Professional Engineers in California Government, one of two unions that sued over the governor's furlough plan, said his group has suggested the governor save money by reducing its outsourcing. Outsourcing engineering jobs to private companies costs the state twice as much as hiring its own engineers, he said.

The lawsuit being considered Thursday argues that mandatory furloughs require either union consent or approval from the state Legislature.

SEIU filed a second lawsuit Tuesday challenging the plan. It claims the state did not follow established legal practice when Schwarzenegger imposed the order at the end of December. The state has not yet responded.

AP-WS-01-28-09 2001EST